Latest Income Tax Slab Rates & Updates — FY 2025-26 (AY 2026-27)
With the recent Budget and Finance Act changes, there have been several important updates to income tax rates and tax slabs in India. This post explains what’s new, how the changes affect taxpayers, and which tax regime may now be more beneficial.
What’s Changed
Basic Exemption Limit Increased
Under the new tax regime (Sec. 115BAC), the basic exemption limit has been raised to ₹ 4,00,000 from the previous ₹ 3,00,000. This means income up to ₹ 4 lakh under the new regime will now attract no tax.
Revised Tax Slabs Under the New Regime
The tax rates for FY 2025-26 (AY 2026-27) under the new regime are as follows:
| Income Range (New Regime) | Tax Rate |
|---|---|
| Up to ₹ 4,00,000 | Nil |
| ₹ 4,00,001 to ₹ 8,00,000 | 5% |
| ₹ 8,00,001 to ₹ 12,00,000 | 10% |
| ₹ 12,00,001 to ₹ 16,00,000 | 15% |
| ₹ 16,00,001 to ₹ 20,00,000 | 20% |
| ₹ 20,00,001 to ₹ 24,00,000 | 25% |
| Above ₹ 24,00,000 | 30% |
Standard Deduction, Old Regime & Surcharges
- Standard Deduction: Remains in force for salary/pension income. Employer’s contribution to NPS (Tier-I) also continues under existing rules.
- Old Regime: Still an option. Old slab rates have not been significantly changed. Taxpayers can opt for this if they have heavy deductions.
- Surcharge & Cess: Surcharge rates remain as before. Health & Education Cess of 4% continues to apply on tax + surcharge.
Who Benefits / Possible Impact
- Middle Income Earners: Particularly those between ₹ 4-24 lakh will see relief due to lower rates in many slabs.
- Low Income: Individuals earning up to ₹ 4 lakh under the new regime now pay no tax at all.
- Senior Citizens: While some exemption limits differ under the old regime, the new regime slab structure is common for all ages.
How to Decide: Old Regime vs New Regime
| Factor | Heavy Deductions? (Old) | Few Deductions? (New) |
|---|---|---|
| Exemptions (80C, 80D) | Old regime may be advantageous. | New regime likely simpler and more beneficial. |
| Income Level | Higher incomes with many deductions should compare carefully. | Middle incomes without many deductions will save under new slabs. |
| Compliance | More paperwork required. | Less paperwork required. |
Example Calculations
Note: Illustrative numbers only.
| Annual Income | New Regime Compute | Old Regime Compute* | Winner |
|---|---|---|---|
| ₹ 6,00,000 | 5% on (6L - 4L) = ₹ 10,000 | Likely higher tax after standard deductions. | New Regime |
| ₹ 15,00,000 | Total approx ₹ 1,05,000 (calculated via slabs) | Might be lower if 80C, HRA, etc. are maxed out. | Calculate Both |
Key Takeaways for Taxpayers
- If taxable income is up to ₹ 4,00,000, the new regime offers zero tax.
- Always compare both regimes before filing—especially if you claim large HRA or Home Loan deductions.
- Keep an eye on surcharge & cess for higher incomes.
Conclusion
The FY 2025-26 tax slab updates under the new tax regime bring meaningful relief to many taxpayers, especially in the lower-middle and middle-income ranges. However, the choice between the old vs new regime remains a case-by-case decision depending on deductions, exemptions, and overall income.